Abstract:

The inflow of foreign direct investment is associated with several positive effects resulting in the growth of gross domestic product of host country. As the investments flow into the host country and more people occupy new jobs, the unemployment rate is decreasing. For this reason, many government is willing to subsidize or provide investment incentives for foreign investors. The paper deals with the relationship between the inflow of foreign direct investment and unemployment in the Slovak Republic for period 1995 – 2106. The goal of the paper is to study the length of the relationship between the investments flow into the Slovakia and the unemployment by the use of the vector autocorrelation regression and related impulse response functions. Results show that the impulse goes from the unemployment to the FDI inflow and the change in the unemployment rate has the impact on the inflow of foreign direct investment to the Slovak Republic. However, the length of this effect is very short.